Stock Prices at Low Point, Focus on Companies with High Earnings Stability
'Subculture Games' Show Steady Growth
Recently, domestic gaming stocks have been sidelined in the market, showing sluggish stock performance. As a result, opinions suggesting that stock prices have fallen as much as they can are gradually emerging. Experts recommend investing primarily in gaming companies with high earnings stability.
According to the financial investment industry on the 17th, the hit rate of new releases from domestic game companies has significantly declined recently. Korea Investment & Securities analyzed that among more than 50 new releases since last year, except for a few games such as "Solo Leveling," "Stella Blade," "First Descendant," and "P-ui Geojit" (P’s Lie), all have failed to achieve commercial success.
Jung Ho-yoon, a researcher at Korea Investment & Securities, stated, "The most important factor when investing in gaming stocks is the success of new releases," adding, "Considering the recent situation, betting on 'failure' when a new game is released would not be wrong."
He also analyzed that even when new releases succeed, many cases fail to lead to long-term stock price increases. For example, Neowiz’s "P-ui Geojit" was the first Korean game to win three awards at Gamescom and showed decent sales performance. However, due to the nature of PC and console games, sales continuity after the initial release is low, causing the stock price to drop sharply after the new release.
Netmarble saw improved earnings with the great success of "Solo Leveling," released in the second quarter, but mobile games also experience a sharp initial sales spike followed by gradual decline. Additionally, with a relatively weak new release lineup, the stock price peaked and then corrected. Recently, Nexon Games’ "First Descendant" also achieved great success on Steam, but with declining indicators, its stock price fell significantly.
Accordingly, researcher Jung recommended investing in companies with high earnings stability whose stock prices are near their lows rather than relying on new release expectations. He analyzed, "The stock prices of many gaming companies such as NCSoft, Pearl Abyss, and Com2uS have fallen to levels showing high downside rigidity," adding, "These companies are in a situation where high downside rigidity and earnings turnarounds can be expected."
Furthermore, he added, "Krafton’s relative investment attractiveness is highlighted as PUBG’s sales are growing rapidly and earnings are improving," and "NHN and Shift Up, which are generating stable earnings from web board games and Japanese casual games, as well as NIKKE’s stable sales, are also companies worth paying attention to."
There was also an analysis that investing in "subculture games" could be a long-term strategy. Subculture games target specific fandoms or niche audiences. These games have the advantage of stable and long-term life cycles and a high hit rate for sequels.
Im Hee-seok, a researcher at Mirae Asset Securities, said, "Many game companies are attempting subculture games, but it seems difficult to achieve success," adding, "Therefore, attention is needed for companies that have already succeeded globally, have become main IPs in Japan, and can expand vertically in the future." He further suggested, "Shift Up and Nexon Games are the top picks."
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